I guess we have to talk about this Mega Millions thing, huh? Update: At least three winners

posted at 10:00 pm on March 30, 2012 by Allahpundit

This is, in fact, officially “news” now that WaPo’s started blast-emailing fluff like this. The drawing’s at 11 p.m. ET in Atlanta. The jackpot? The biggest in the history of the world. Public excitement? Approaching the theoretical levels of a hundred Super Bowls squared.

Be honest. How many of you paid the idiot tax today?

If a single ticket matches all six winning numbers, the player would receive either a one-time payment of $462 million or the full [$640 million] jackpot in 26 annual installment payments…

The previous largest Mega Millions jackpot was $390 million in 2007, which was split between two ticket holders in Georgia and New Jersey…

If no one wins on Friday night, the jackpot will grow to $975 million. Lottery officials are considering moving the next drawing after Friday to Times Square in New York City as the anticipation and jackpot build, DeFrancisco said.

I didn’t buy a ticket, but in the spirit of the occasion and in the interest of solidarity with hopefuls everywhere, I did pull out a $10 bill and light it on fire. Say, wait — once the jackpot gets this big, aren’t the odds kinda sorta in your favor? Yes and no.

In theory, since a ticket costs only $1 and your odds of picking the winning numbers are 1 in 176 million, the lottery should be a reasonable bet when the jackpot climbs past $176 million. But Ben Casselman points to an analysis by computer scientist Jeremy Elson that lays out some complicating factors. You have to factor in taxes, plus the fact that you get a smaller amount if you ask for an upfront lump sum, plus the risk that you may have to split the winnings with someone else. When the jackpot gets this obscenely large, everyone and their aunt wants to play…

Of course, another strategy would simply be to buy up every single ticket combination. That would cost $176 million. But you’d be guaranteed to win about $293 million after taxes. Good deal, right? But there’s one big hitch: “First, if it takes five seconds to fill out each card, you’d need almost 28 years just to mark the bubbles on the game tickets. You’d also use up the national supply of special lottery paper and lottery-machine printing ink well before all your tickets could be printed out.” (Also, if just one other person picked the winning number, you’d end up losing $30 million all told.)

To celebrate the moment, via BuzzFeed’s Andrew Kaczynski, enjoy this video from 2000 of a young state senator, who would never use games of chance to fund his own campaign, furrowing his brow over the way the lottery acts as a regressive tax on the working class. Second look at saving suckers from themselves?

Update: Alas, there’ll be no billion-dollar jackpot drawing in Times Square after all. There are winners in Maryland, Illinois, and Kansas, and maybe more still to be revealed.

Actually, at the current numbers, it is no longer a tax. the dollar you pay in has a higher potential return value than the risk of total loss. So, while it is totally irrational at $5m to buy a ticket if you do not get a rush of enjoyment commensurate to having spent that dollar, at $462M or after taxes where I live $284M, it is no longer an irrational, but rational when you consider that you can win more than the inverse of the risk/reward and you get a rush of enjoyment commensurate with having spent that dollar.

Your argument of it being a tax on the people with bad math is valid at certain times, at this time, facts have changed, and so to do the calculations.

Except that at this level they’ll sell nearly all the number combinations and a lot of combinations — especially those with low numbers that correspond to dates — will sell multiple times. So . . . you might have to share it.

But the perpetual truth for some players is that your dollar buys you a few hours or days of pleasant daydreaming about how you’d spend your loot. That’s worth a buck.

To celebrate the moment, via BuzzFeed’s Andrew Kaczynski, enjoy this video from 2000 of a young state senator, who would never use games of chance to fund his own campaign, furrowing his brow over the way the lottery acts as a regressive tax on the working class.

Yes, because we all know how much the Obama adminstration hates
those regressive taxes.

Except that at this level they’ll sell nearly all the number combinations and a lot of combinations — especially those with low numbers that correspond to dates — will sell multiple times. So . . . you might have to share it.

But the perpetual truth for some players is that your dollar buys you a few hours or days of pleasant daydreaming about how you’d spend your loot. That’s worth a buck.

SoRight on March 30, 2012 at 11:55 PM

That is why I added the statement of commensurate with the enjoyment you get. That increases your value, whether you win or lose.

I like to play craps, I hate roulette and card games. Losing money on craps is not a loss, as I enjoy it to the extent that I was willing to lose that specific amount of money. Usually about one trip every five years or so and take $150 with me. Its fun and entertainment, and costs over my lifetime much less than my video games. Now if I played the other games, it is pure loss, agravated by the game and out the money.

That is free for you, and well worth the investment. I spent $30 on this run through. I think the three days of imagination were worth the $30, as typically a movie costs about $30 to go see and lasts at most 3 hours, and in these days and ages the movies are highly likely to disappoint. I will drop another $20 if no one won this go through, and imagine for a few more days. I never intended to spend $30 initially, as I thought the tickets I bought on Tuesday were for Tuesday.

-Pay off debt – chump change at that level.
-Buy a small farm, some animals and equipment – I want an underground house too.
-Take some trips we’d wanted to take – nothing fancy (see some family and friends, take an extended summer tour of Europe and Israel).
-Buy an MGB, maybe a couple other Brit cars.
-Set aside a nice savings account wherein we can live off the interest – pay our yearly property taxes and such.
-Set up some nice funds for close family and friends.
-Give the rest away to charity of our choosing.

At that level of winnings, most of the money would be given away. We don’t want to live the “Lifestyles of the Rich and Famous”.

I can’t help but think back to all of the stories I’ve read about lottery winners going downhill from the moment their numbers were drawn. Lost friendships, emotional rollercoasters, binge eating, binge drinking, binge spending, bad investments, eventually losing it all etc. I used to do the lottery many years ago, but I always felt that there would be something disappointing or unsatisfactory about winning that much money.

It wasn’t until I’d read Ayn Rand that I realized why: Wealth is best enjoyed as the product of your own labor. If you win the lottery, you have all that money, but without the self esteem that comes from earning it honestly. In addition, the experience of earning great wealth prepares one for the lifestyle associated with having it. Dump a huge pile of cash on someone who hasn’t earned it, and they invariably blow it on gaudy trinkets, tasteless furniture and clothes which don’t suit them. I’ve lost count of the times I’ve read a story about a lottery winner who hit skid row, then said losing the money was the best thing that ever happened to them.

Dump a huge pile of cash on someone who hasn’t earned it, and they invariably blow it on gaudy trinkets, tasteless furniture and clothes which don’t suit them. I’ve lost count of the times I’ve read a story about a lottery winner who hit skid row, then said losing the money was the best thing that ever happened to them.

Sharke on March 31, 2012 at 12:19 AM

Don’t worry. I plan on only buying tasteful furniture and trinkets along with clothes that do suit me. And a good looking cabana boy.

Look… I am a treasury manager and when the potential return is so big it is certainly worth venturing a buck (as part of a diversified investment portfolio). It’s fun too until the numbers are picked and you got nothing.

How much fun there is for a couple of bucks and what do we hear? People whining about the lottery calling it the idiot tax. We all sat around sipping our coffee curing the worlds problems for about an hour chatting about what we would do if we won. What about the over two thousand dollars a year it costs to smoke?

Technically, when the size of the jackpot grows over the odds of winning x 1$ ($175m in the case of Mega Millions; $350m now for Powerball which recently moved to $2 tickets), a lottery ticket is a gainful investment. The more you buy, the more you make!

Let’s see: people spent a total of 1.5 billions for the jackpot of 675 millions dollars, the governments had already taken a more than 50% cut, Now the winners of the draw will be taxed at the top rate for State and Federal Tax. The real winners are the state and the federal governments.

How much fun there is for a couple of bucks and what do we hear? People whining about the lottery calling it the idiot tax. We all sat around sipping our coffee curing the worlds problems for about an hour chatting about what we would do if we won. What about the over two thousand dollars a year it costs to smoke?

mixplix on March 31, 2012 at 6:00 AM

Yup.

Be honest. How many of you paid the idiot tax today?

It’s not a tax at all. It’s completely voluntary. And… I won, twice.

I won $4 and $7 according to my state’s payout list. It’s not enough to buy my baby granddaughter an elephant but I’m a winner this morning so the rest of you can just keep talking about hopey changey nightmare crap. I’m now livin’ the dream…

I probably won’t be posting anymore ’cause I have to meet with lawyers, to figure out how best to invest it, you know, open some trust funds, start a charity foundation…

There are 3 winning tickets.
Let’s see: people spent a total of 1.5 billions for the jackpot of 675 millions dollars, the governments had already taken a more than 50% cut, Now the winners of the draw will be taxed at the top rate for State and Federal Tax. The real winners are the state and the federal governments.
galtani on March 31, 2012 at 8:47 AM

People will line up for 2 hours to get a ticket for a $500M jackpot. But won’t buy a ticket for a $10M jackpot. LOL. Yeah because $10M is chump change and it’s only worth your while when the jackpot gets to some real money, right?

For the record, if I came into that kind of money I’d get Van Halen to play at my party. (if you don’t get the reference, don’t worry).

People will line up for 2 hours to get a ticket for a $500M jackpot. But won’t buy a ticket for a $10M jackpot. LOL. Yeah because $10M is chump change and it’s only worth your while when the jackpot gets to some real money, right?

angryed on March 31, 2012 at 9:55 AM

Morning Ed, I just need to toot my own horn a little more. After I bought my $20 worth of winning Mega Million tickets, I said, Sir? Could I please have $10 worth of tomorrow’s Power Ball tickets, just in case.?.. :) See, some of us aren’t so dumb.

I don’t want to burst your bubble *ahem* but as a real lottery winner I need to correct you. You only saved $1. Mega Million tickets cost a dollar, Power Ball tickets cost two bucks. So, technically, you could “win” $2 tonight but you only “won” $1 yesterday.

In California, there were 29 5/5 winners which got them $227,955 each. Not bad.

Blake on March 31, 2012 at 10:24 AM

Out of what, 10 million tickets? So that is what %? .0003%…you would have better odds of randomly picking out my phone number if I gave you my area code…send me $10 and the number, if it’s correct I will give you $227,955…

I really hope that none of us whom favor lower taxes actually bought tickets! The lottery is just a tax on those of us who suck at math.

Russ in OR on March 31, 2012 at 10:31 AM

I don’t understand this mindset at all. The lottery is completely voluntary, it isn’t a tax on stupid or people who suck at math. Once in a while, it’s a fun chance at a dream. It isn’t a tax at all.

I’ve probably played three times in the last four years, or so. I think all this negative pooh-poohing of the lottery is silly. (Unless, you oppose it on religious grounds, then you have every right not to play *even if you secretly want to*, lol).

Don’t Republicans believe that we are better stewards of our own money? Don’t we have the ability to decide for ourselves whether we have disposable income and want to take a chance for a $1 or $20? It’s still somewhat of a free country, you can mock those who played last night but we had an infinitesimal chance at winning. Those who didn’t play kept their money safe but didn’t even have the fun and excitement of having a tiny, tiny chance.

It always cracks me up when the guy who runs our office pool gives us a report of the results if we won anything for the Powerball games. It’s usually something like “we won $37 from the 95 tickets we bought.” So far, no one has ever come forward asking for their share. LOL

I guess we didn’t do very well in the Mega Millions, either. Otherwise I’d probably hear protracted cheering and celebrating from 20 miles away.

Oh for pete’s sake all you snactimonious critics, get a grip. What is wrong with taking a risk once in a while? If a person gets enjoyment out of it who are you to judge? People take risks all the time. People spend money on things you or I consider foolish all the time. So what? I’ll bet there are things you spend money on that I would think are a waste, and vice versa. But I’m not going to judge you for it. On the other hand if you never take a risk or spend money or time just for the fun you are a truly sad person.
I personally know two lottery winners who won $3 million and $17 million respectively. It didn’t change them that much. They invested, bought new homes, gave to kids and grandkids, and treated themselves a bit. Now both of these winners played once a week the same numbers for $2.00. Did they spend more than they won? No where near as they had been playing for less than ten years. It was just extra change and they enjoyed it. They could have spent that $2.00 on a movie rental or candy or soda instead. So what is the big deal?

The idea of a linear relationship between utility and money is so bizarre and unrealistic that it makes orthodox Marxism look like hard-headed economic analysis by comparison.

Playing the lottery might not be a good economic investment, even after $176 million, because of diminishing marginal utility, but in order to really evaluate whether it’s a good idea, you would need to compare it with what else you could do with that dollar, and how much you wanted to do/have that thing, what the expected utility you gain from becoming obscenely rich is, and so forth.

If I am financially comfortable enough to buy all the relatively cheap consumer goods that I want at the moment, and will likely continue to be, and everything else I want is insanely more expensive, then the utility of a dollar is much lower than it might be for someone else. I may very well gain more expected utility from a tiny chance of striking it rich than I do from keeping the dollar when I am financially stable enough for it to have a negligible impact on my finances.

Oh for pete’s sake all you snactimonious critics, get a grip. What is wrong with taking a risk once in a while? If a person gets enjoyment out of it who are you to judge? People take risks all the time. People spend money on things you or I consider foolish all the time. So what? I’ll bet there are things you spend money on that I would think are a waste, and vice versa. But I’m not going to judge you for it. On the other hand if you never take a risk or spend money or time just for the fun you are a truly sad person.
I personally know two lottery winners who won $3 million and $17 million respectively. It didn’t change them that much. They invested, bought new homes, gave to kids and grandkids, and treated themselves a bit. Now both of these winners played once a week the same numbers for $2.00. Did they spend more than they won? No where near as they had been playing for less than ten years. It was just extra change and they enjoyed it. They could have spent that $2.00 on a movie rental or candy or soda instead. So what is the big deal?

Oh for pete’s sake all you snactimonious critics, get a grip. What is wrong with taking a risk once in a while? If a person gets enjoyment out of it who are you to judge? People take risks all the time. People spend money on things you or I consider foolish all the time. So what? I’ll bet there are things you spend money on that I would think are a waste, and vice versa. But I’m not going to judge you for it. On the other hand if you never take a risk or spend money or time just for the fun you are a truly sad person.
I personally know two lottery winners who won $3 million and $17 million respectively. It didn’t change them that much. They invested, bought new homes, gave to kids and grandkids, and treated themselves a bit. Now both of these winners played once a week the same numbers for $2.00. Did they spend more than they won? No where near as they had been playing for less than ten years. It was just extra change and they enjoyed it. They could have spent that $2.00 on a movie rental or candy or soda instead. So what is the big deal?

Deanna on March 31, 2012 at 11:20 AM

^^^This, again. It needed to be said.

On the other hand, both my hubby and a girlfriend of mine have won raffles and/or daily number drawings and have won amounts ranging from $250 to $400. Inevitably, almost immediately afterward, there’s either a bill that comes due or an appliance that breaks which costs nearly the same amount as the winnings. That’s some kind of luck. LOL

Out of what, 10 million tickets? So that is what %? .0003%…you would have better odds of randomly picking out my phone number if I gave you my area code…send me $10 and the number, if it’s correct I will give you $227,955…

right2bright on March 31, 2012 at 10:36 AM

And your point was what, you drip? There were still a high number of 5/5 winners in California.

I wouldn’t wish the curse of that $462 million or the full [$640 million] jackpot on anyone I know, and I pity those that now fall under the slew of BIG Government regulations and shall now be ‘occupied’ by the dregs of society.

I never play when I could win/take home more than a million. The safety of my family would be at stake if my luck changed that badly.